The legal battle over Whole Foods Market’s takeover of rival natural foods retailer Wild Oats has taken a fresh twist with confidential information mistakenly made public in a court filing by the Federal Trade Commission (FTC).
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The federal regulator, which is attempting to block Whole Foods’ US$565m takeover of Wild Oats on antitrust grounds, filed court documents outlining concerns that the deal would lead to store closures and higher prices. The FTC said consumers would “unambiguously be worse off”. A judge is currently considering whether to block the deal temporarily.
Specifically, the documents revealed that Whole Foods planned to close 30 or more Wild Oats stores in markets where they compete with a Whole Foods outlet, which it expected would almost double sales in remaining Whole Foods stores.
The agency also revealed details of how Whole Foods negotiates with suppliers to increase costs for Wal-Mart, and marketing strategies that were also supposed to remain confidential.
As far as can be gleaned at the moment, the disclosure was a computer error which allowed elements in the filing that should have been blacked out to be searched for, read and copied. Once the error was detected, court officials replaced the filing with a scanned version where the blacked out passages could not be read. But by that time the material had already been widely disseminated.
Whole Foods is likely to be seething after the disclosure. In a statement, the retailer said: “Whole Foods Market is investigating the apparent improper release by the Federal Trade Commission of confidential proprietary business information belonging to Whole Foods Market, Wild Oats and other third parties, in violation of the court’s confidentiality order. In fact, the court has twice ordered this information to be held under seal.”
The retailer also added that it would not have enough information to make decisions on store closures until the merger had been completed. “Until the merger is complete, Whole Foods will not have sufficient information, including store level financial statements, to make any final decisions regarding future operations. All information shared with the FTC was done so with the reasonable understanding that it would be handled appropriately.”
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By GlobalDataThe FTC, meanwhile, has not commented further.
According to the supposedly confidential elements of the FTC filing, the opening of a Whole Foods store can cut revenue by 30% at nearby Wild Oats stores. The filing also states that Whole Foods sets “ground rules” preventing suppliers from selling directly to Wal-Mart.
